Canadian Lifestyles: It's Not Dollars to Donuts - Canada - April 2016

OVERVIEW
What you need to know
Definition
EXECUTIVE SUMMARY
Canada today
The people
The economy
The consumer
The majority of Canadians perceive their financial health to be stable
Figure 1: Perception of financial health, February 2016
Debt reduction and saving for retirement are the biggest financial challenges
Figure 2: Financial challenges, February 2016
Canadians feeling the pinch of increased living costs
Figure 3: Factors impacting financial situation, February 2016
There is a sense of concern among consumers
Figure 4: Attitudes towards current economic state, February 2016
Consumers are more focused on the future than the now
Figure 5: Attitudes towards spending, February 2016
What it means
CANADA TODAY – THE PEOPLE
What you need to know
The population is primarily concentrated in four urban centres
Figure 6: Share of population of Canada, by territory/province, 2014
Canadian population is growing due mainly to immigration
Figure 7: Region of birth of immigrants, by period of immigration, Canada, 2011
Figure 8: Foreign-born share of population by G8 country and Australia
Canada is a low-fertility society
Figure 9: Annual births and birth rate*, 1981-2011
The average age at childbirth is rising
Figure 10: Fertility rate, by age group (per 1,000 women), 2001-11
Canada is experiencing a “baby boomlet”
Figure 11: Projected trends in the age structure of the Canadian population, 2014-19
Canada’s population is aging
Figure 12: Population aged 65 years and over in Canada, historical and projected (% of total), 1971-2061
Shifts in the family structure
Figure 13: Distribution and percentage change of census families, by family structure, 2001-11
As seen in Mintel reports
What this means for retailers
Figure 14: Parenting situation among Canadian mothers, August 2014
CANADA TODAY – THE ECONOMY
What you need to know
Overall negative impact of lower oil prices on the Canadian economy
Figure 15: Quarterly growth rates of real GDP, change over previous quarter, Q1 2010-Q4 2015
Canada’s employment rate has been steady, but age is impacting labour force participation
Figure 16: Canada’s unemployment rate, by gender, February 2010-February 2016
The weak Canadian dollar is impacting import costs
Impact of inflation
Figure 17: Consumer price index, February 2010-February 2016
The rising price of groceries
Bank of Canada keeps interest rate at 0.5%
Figure 18: Canada bank rate 2005-16, March 2016
The Canadian Dollar remains weak
Figure 19: Historical Canadian/US currency rate comparisons, December 2011-December 2015
Wealth distribution and household debt levels in Canada
Alberta faces the brunt of the resource sector decline
Household debt levels are adding pressure to Canadian consumers
Figure 20: Total household debt percent of net disposable income for G7 countries, 2004-14
EXPENDITURE OVERVIEW
What you need to know
Total Canadian consumer expenditures 2015
Figure 21: Total Canada consumer expenditure and fan chart forecast, at current prices, 2014
Outlook for the next five years
Figure 22: Total Canadian consumer expenditure and fan chart forecast, at current prices, 2010-20
CATEGORY REVIEW – IN-HOME FOOD
What you need to know
What it means
Food inflation supports increase in sales
Figure 23: Total Canadian consumer expenditure on food (at home), at current prices, 2010-15
Upward sales momentum forecasted to continue
Figure 24: Best- and worst-case forecast value sales of the food (at home) market, at current prices, 2010-20
What’s working
Grocers successfully build defences against new entrants
What’s not working
Inflation taking a bite out of consumers’ wallets
Trust deficit needs to be addressed with consumers
What’s next
Evolving consumer base influences consumer demand
Changing consumer spending habits
Figure 25: Perceived change in spend on food (at home) compared to prior years, February 2015 and 2016
Key consumer findings in the food market
CATEGORY REVIEW – DINING OUT
What you need to know
What it means
Foodservice has enjoyed steady growth
Figure 26: Total Canadian consumer expenditure on food – Dining out, at current prices, 2010-15
The growth trend continues
Figure 27: Best- and worst-case forecast value sales of the food – Dining out market, at current prices, 2010-20
What’s working
What’s facing challenges
What’s next
Changing consumer spending habits
Figure 28: Perceived change in spend on food – Dining out compared to prior years, February 2015 and 2016
Key consumer findings
CATEGORY REVIEW – ALCOHOLIC BEVERAGES (AT HOME)
What you need to know
What it means
Beer remains the top choice for Canadians, but wine is growing share
Figure 29: Total Canadian consumer expenditure on alcoholic beverages (at home), at current prices, 2010-15
Wine share forecasted to continue gains in a slower-growing market
Figure 30: Best- and worst-case forecast value sales of the alcoholic beverages (at home) market, at current prices, 2010-20
What’s working
Wine growth supported by aging Boomer cohort
Value sales outpacing volume reflects continued trend to premiumization in industry
Demand for craft beer higher among women
What’s not working
Beer volume losing share to wine
What’s next
Merger makes beer mega-brewer
Regulation to open up beer sales at grocery designed to support Ontario’s craft beer industry
Changing consumer spending habits
Figure 31: Perceived change in spend on alcoholic beverages (at home) compared to prior years, February 2015 and 2016
Key consumer findings
CATEGORY REVIEW – ALCOHOLIC BEVERAGES (OUT OF HOME)
What you need to know
What it means
Increase in sales of alcoholic beverages at foodservice continues to trail at-home options and overall foodservice growth
Figure 32: Total Canadian consumer expenditure on alcoholic beverages (out of home), at current prices, 2010-15
Added value needed to win share in a soft growth environment
Figure 33: Best- and worst-case forecast value sales of the alcoholic beverages (out of home) market, at current prices, 2010-20
What’s working
Pairing places more importance on alcoholic beverages
Leveraging the art of the pour
Girls’ night out
What’s not working
Economic and societal challenges for on-premise alcoholic beverage consumption
What’s next
Flavoured craft beers provide an opportunity for differentiation
Starbucks – “Where everybody knows your name”
Changing consumer spending habits
Figure 34: Perceived change in spend on alcoholic beverages (out of home) compared to prior years, February 2015 and 2016
Key consumer findings
CATEGORY REVIEW – NON-ALCOHOLIC BEVERAGES (AT HOME)
What you need to know
What it means
Beverage market becoming more diversified
Figure 35: Total Canadian consumer expenditure on non-alcoholic beverages (at home), at current prices, 2010-15
Diversification in beverage market to continue
Figure 36: Best- and worst-case forecast value sales of the non-alcoholic beverages (at home) market, at current prices, 2010-20
What’s working
Smaller is better for CSDs
Manufacturers invest in flavour mixes
What’s not working
Sugar a barrier to CSD and juice consumption
K-Cups experience first decline – a sign of a maturing category
What’s next
Demand for premium/natural CSDs and energy drinks
Fewer ingredients with more benefits in juice
Perception of spending remains consistent with last year
Figure 37: Perceived change in spend on non-alcoholic beverages (at home) compared to prior years, February 2015 and 2016
Key consumer findings
CATEGORY REVIEW – BEAUTY AND PERSONAL CARE
What you need to know
What it means
Canada’s beauty and personal care market saw modest growth with the exception of 2013
Figure 38: Total Canadian consumer expenditure on beauty and personal care, at current prices, 2010-15
The forecast for the sector is of continued slow growth
Figure 39: Best- and worst-case forecast value sales of the beauty and personal care market, at current prices, 2010-20
What’s working
The appeal of low prices
Marketing to men
The Sephora effect
What’s not working
Competitive environment for beauty retailers and brands and the need to stand out
What’s next
Multi-functionality and personalization
Boosting online sales
Changing consumer spending habits
Figure 40: Perceived change in spend on beauty and personal care compared to prior years, February 2015 and 2016
Key consumer findings
CATEGORY REVIEW – OTC HEALTHCARE REMEDIES
What you need to know
What it means
The sector has been growing at a moderate pace since 2010
Figure 41: Total Canadian consumer expenditure on OTC healthcare remedies, at current prices, 2010-15
Growth rate forecasted to slow
Figure 42: Best- and worst-case forecast value sales of the OTC healthcare remedies market, at current prices, 2010-20
What’s working
Figure 43: Tropic Fruit Multivitamin Adult Chews Centrum
What’s next
Changing consumer spending habits
Figure 44: Perceived change in spend on OTC healthcare remedies compared to prior years, February 2015 and 2016
Key consumer findings
CATEGORY REVIEW – HOUSEHOLD CARE
What you need to know
What it means
Sector growth continues to soften
Figure 45: Total Canadian consumer expenditure on household care, at current prices, 2010-15
Mintel predicts that the sector will plateau
Figure 46: Best- and worst-case forecast value sales of the household care market, at current prices, 2010-20
What’s working
What’s not working
What’s next
Changing consumer spending habits
Figure 47: Perceived change in spend on household care compared to prior years, February 2015 and 2016
Key consumer findings
CATEGORY REVIEW – CLOTHING, FOOTWEAR AND ACCESSORIES
What you need to know
What it means
Upward momentum on clothing, footwear and accessories has led to an estimated $48.3 billion market
Figure 48: Total Canadian consumer expenditure on clothing, footwear and accessories, at current prices, 2010-15
Growth of the sector will slow
Figure 49: Best- and worst-case forecast value sales of the clothing, footwear and accessories market, at current prices, 2010-20
What’s working
What’s not working
What’s next
Changing consumer spending habits
Figure 50: Perceived change in spend on clothing, footwear and accessories compared to prior years, February 2015 and 2016
Key consumer findings
CATEGORY REVIEW – TECHNOLOGY AND COMMUNICATIONS
What you need to know
What it means
Growth to continue but not at the pace seen in 2014
Figure 51: Total Canadian consumer expenditure on technology and communications, at current prices, 2010-15
Slow growth predicted to continue
Figure 52: Best- and worst-case forecast value sales of the technology and communications market, at current prices, 2010-20
What’s working
Mobile phone ownership is dominated by smartphones
Overall, Canadian consumers are satisfied with their cell phones
What’s not working
Online security is a concern, especially for those using mobile payments
New mobile phones and data are expensive
Smartwatch popularity is lagging
What’s next
Most Canadians are interested in a ‘connected’ smart home
Changing consumer spending habits
Figure 53: Perceived change in spend on technology and communications compared to prior years, February 2015 and 2016
Key consumer findings
CATEGORY REVIEW – VACATIONS AND TOURISM
What you need to know
What it means
Growth in travel continues, but has slowed slightly
Figure 54: Total Canadian consumer expenditure on vacations and tourism, at current prices, 2010-15
Regardless of financial constraints and weaker Canadian Dollar, Millennials will fuel growth in travel
Figure 55: Best- and worst-case forecast value sales of the vacations and tourism market, at current prices, 2010-20
What’s working
Cruises implement “pricing integrity” policies
Reviews by social media influencers can be a powerful tool
Kimpton hones in on the power of karma
What’s not working
Zika concerns may keep Canadians from travelling overseas
Weakness in energy sector creates less demand on flights
What’s next
Appealing to all ages and affluence levels
Changing consumer spending habits
Figure 56: Perceived change in spend on vacations and tourism compared to prior years, February 2015 and 2016
Key consumer findings
CATEGORY REVIEW – LEISURE AND ENTERTAINMENT
What you need to know
What it means
Change of focus on discretionary funds remains a barrier to participation
Figure 57: Total Canadian consumer expenditure on leisure and entertainment, at current prices, 2010-15
Negligible growth expected for entertainment and leisure market
Figure 58: Best- and worst-case forecast value sales of the leisure and entertainment market, at current prices, 2010-20
What’s working
Cinema in style
What’s not working
Difficulties in attracting younger consumers
What’s next
Bringing the fun to the consumer
Seamless payment
Changing consumer spending habits
Figure 59: Perceived change in spend on leisure and entertainment compared to prior years, February 2015 and 2016
Key consumer findings
CATEGORY REVIEW – HOME AND GARDEN
What you need to know
What it means
The sector has been increasing steadily over the past five years
Figure 60: Total Canadian consumer expenditure on home and garden, at current prices, 2010-15
Slowing growth forecasted for the future
Figure 61: Best- and worst-case forecast value sales of the home and garden market, at current prices, 2010-20
What’s working
What’s not working
What’s next
Changing consumer spending habits
Figure 62: Perceived change in spend on home and garden compared to prior years, February 2015 and 2016
Key consumer findings
CATEGORY REVIEW – TRANSPORTATION
What you need to know
What it means
Expenditures on this sector have seen healthy growth
Figure 63: Total Canadian consumer expenditure on transportation, at current prices, 2010-15
Growth continues for the transportation sector
Figure 64: Best- and worst-case forecast value sales of the transportation market, at current prices, 2010-20
What’s working
Strong sales of new vehicles
What’s not working
Millennial disinterest in vehicle ownership
What’s next
Uber arising as a major competitor to the established taxi industry in Canada
Changing consumer spending habits
Figure 65: Perceived change in spend on transportation compared to prior years, February 2015 and 2016
Key consumer findings
CATEGORY REVIEW – PERSONAL FINANCE
What you need to know
What it means
Personal finance expenditure forecast to grow steadily
Figure 66: Total Canadian consumer expenditure on financial services, at current prices, 2010-15
Positive momentum predicted to reach $94.9 billion in 2020
Figure 67: Best- and worst-case forecast value sales of personal financial services, at current prices, 2010-20
What’s working
What’s next
Key consumer findings
Around a third of Canadians have less than $5,000 in debt
Over-65s have the highest ownership of investment products
Most Canadians own and use a credit card
Majority of Canadians expect to be debt-free and not overly dependent on government old age security at retirement
CATEGORY REVIEW – HOUSING
What you need to know
What it means
Housing costs have been on the rise
Figure 68: Total Canadian consumer expenditures on housing, at current prices, 2010-15
Continued growth is predicted
Figure 69: Best- and worst-case forecast value sales of housing, at current prices, 2010-20
What’s next
Key consumer findings
Two out of three Canadians find the housing market overvalued
Around half of Canadians agree that immigration fuels housing demand
British Columbians most likely to believe that foreign buyers are driving the real estate market in major cities
THE CONSUMER – HOW CANADIANS PERCEIVE THEIR FINANCIAL HEALTH
What you need to know
Majority of Canadians perceive their financial health as stable
Figure 70: Perception of financial health, February 2016
The gender divide
Figure 71: Perception of financial health, by gender, February 2016
Perception of financial health improves with life stage
Figure 72: Perception of financial health, by age, February 2016
Opportunity: Getting them while they are still fresh
THE CONSUMER – FINANCIAL CHALLENGES AND PRIORITIES
What you need to know
Paying off debt and saving for retirement are the biggest challenges
Figure 73: Financial challenges, February 2016
Paying off debt is part and parcel with retirement planning
Figure 74: Attitudes towards saving for retirement, February 2016
Millennial women and parents with young children are most likely to prioritize debt reduction and short-term goals
Saving for retirement more likely to be a concern for 45-54s
Figure 75: Attitudes towards saving for retirement (any agree), by age, February 2016
THE CONSUMER – FACTORS IMPACTING CURRENT FINANCIAL SITUATION
What you need to know
Canadians are feeling the pinch of rising costs
Figure 76: Factors impacting financial situation, February 2016
In their words
Middle-aged Canadians most likely to feel the pressure
Figure 77: ‘Increased cost of living’ as biggest factor impacting financial situation, by age, February 2016
Opportunities for retailers
Personalizing offers and making them sharable
Leveraging technology
THE CONSUMER – PERCEIVED CHANGES TO SPENDING VS PRIOR YEARS
What you need to know
Four in 10 Canadians feel they are spending more on groceries
Figure 78: Perceived changes in spending in 2015 compared to prior years, February 2016
Rising food costs felt most by parents with children at home – particularly mothers
Figure 79: Perceived ‘spending more’ in 2015 on in-home food compared to prior years, by presence of children, February 2016
The impact of grocery costs on consumer behaviour – In their words
Grocery retailers are recognizing opportunities and taking action
THE CONSUMER – WHERE EXTRA MONEY IS SPENT
What you need to know
Canadians balance debt reduction and treats once all the basics have been taken care of
Figure 80: How extra money is spent, February 2016
Discretionary spending varies with age
Parents are most inclined to put extra money towards their debt
Millennials are prioritizing smaller treats
Older men more likely to treat themselves to long vacations
Canadians less likely to spend on treats in 2016 compared to 2015
Figure 81: Difference in categories where extra money is spent in 2016 vs 2015, February 2016
THE CONSUMER – OUTLOOK ON THE CURRENT ECONOMY
What you need to know
Consumers are wary
Figure 82: Attitudes towards current economic state, February 2016
Impact of the rise in cost of living – In their words
Low Dollar value is seen as a contributor to rising costs
Figure 83: Attitudes towards current economic state, February 2016
Lower Dollar value a boon for Canada’s tourism industry
Women are more affected by the current economy
Figure 84: Attitudes towards current economic state (any agree), by gender, February 2016
How retail brands can help
Potential also exists for financial brands
THE CONSUMER – APPROACH TO SPENDING
What you need to know
Canadians are preparing for the future
Figure 85: Attitudes towards spending, February 2016
Consumers approach spend with careful consideration and are willing to invest in products that will last
Figure 86: Attitudes towards spending, February 2016
Approach to spending – In their words
Taking time to find deals
Spending in moderation
Paying more for quality products that last longer
Canadians are leaning towards trading down when buying groceries
Figure 87: Attitudes towards spending, February 2016
The gender gap
Women under 55 and mothers are the most likely to spend the time to find deals
Figure 88: Attitudes towards spending (net top 2 agreement), by gender, age and parental status, February 2016
Fewer Millennial women have the luxury to spend in moderation
Opportunities for brands and retailers
APPENDIX – DATA SOURCES AND ABBREVIATIONS
Data sources
Fan chart forecast
Consumer survey data
Consumer qualitative research
Abbreviations and terms
Abbreviations
APPENDIX – MARKET
Figure 89: Total Canada sales and forecast of overall expenditures, at inflation-adjusted prices, 2010-20
Figure 90: Total Canada sales and forecast of food (at home), at inflation-adjusted prices, 2010-20
Figure 91: Total Canada sales and forecast of food – Dining out market, at inflation-adjusted prices, 2010-20
Figure 92: Total Canada sales and forecast of alcoholic beverages (at home) market, at inflation-adjusted prices, 2010-20
Figure 93: Total Canada sales and forecast of alcoholic beverages (out of home) market, at inflation-adjusted prices, 2010-20
Figure 94: Total Canada sales and forecast of non-alcoholic beverages (at home) market, at inflation-adjusted prices, 2010-20
Figure 95: Total Canada sales and forecast of beauty and personal care market, at inflation-adjusted prices, 2010-20
Figure 96: Total Canada sales and forecast of OTC healthcare remedies market, at inflation-adjusted prices, 2010-20
Figure 97: Total Canada sales and forecast of household care market, at inflation-adjusted prices, 2010-20
Figure 98: Total Canada sales and forecast of clothing, footwear and accessories market, at inflation-adjusted prices, 2010-20
Figure 99: Total Canada sales and forecast of technology and communications market, at inflation-adjusted prices, 2010-20
Figure 100: Total Canada sales and forecast of vacations and tourism market, at inflation-adjusted prices, 2010-20
Figure 101: Total Canada sales and forecast of leisure and entertainment market, at inflation-adjusted prices, 2010-20
Figure 102: Total Canada sales and forecast of home and garden market, at inflation-adjusted prices, 2010-20
Figure 103: Total Canada sales and forecast of transportation market, at inflation-adjusted prices, 2010-20
Figure 104: Total Canada sales and forecast of financial services market, at inflation-adjusted prices, 2010-20
Figure 105: Total Canada sales and forecast of housing market, at inflation-adjusted prices, 2010-20